24 March 2022: Utter Madness

That’s the only way to describe the milk powder market, as it is being driven by trader greed rather than fundamental factors.

Here are this week's indicators - skim milk powder up €160 (+4%, largest single weekly rise in decades), sweet whey up €30 (+2%) - whilst the soy complex sits pretty well unchanged, and palm oil only marginally higher. True, we are seeing chronic shortage of derivatives such as whey protein concentrate, fat-filled whey and hydrolysed wheat gluten, but there is no spot shortage of whey or skim, almost exclusively offered by traders and middle market operators. Interestingly, forward offers are being reined in, as even trader greed is now being tempered by financial worries, as the huge increase in raw material costs has dwarfed credit insurance ceilings. Won’t be long now before global recession crashes many a market, but will the global reset support food commodities over computer components and even energy?

An interesting fact - Wheat prices have risen 76% year on year. Poultry, the highest performing commodity in the ag food sector, has risen by 14% over the same period. Something’s got to give.

BDC agri is the UK broker for Lacto Production milk and whey powder products.

For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com

17 March 2022: Skim breaks €4000 ceiling

I make no apology for using the CLAL graphic again, showing just how stark the rise in skim milk price has been, the counterpoint being the opposite effects of Russian incursions into Ukraine in 2014 and 2022. Last time the sanctions imposed on Russia sharply reduced the export of skim milk, but there was still quarter of a million tonnes in EU intervention stock at the time, the luxury of which we no longer enjoy. Large scale purchases by the edible sector has pulled up feed grade skim, the former up €140 on the week, feed grade by €100. Sweet whey is nominally up only €30, but traders are pushing for and getting significantly more.

The backdrop doesn’t support the milk powder rush, as the soy complex has seen as many red days as green over the last week, and palm oil has fallen back to invasion day levels. Province-wide covid lockdowns in China have helped crude oil prices significantly lower, but the markets have corrected by bouncing 5% today. So the fact that milk powders are starkly higher whilst few of the other staples support the argument suggests that when the market breaks, as all markets do, the collapse is likely to match the 2014 slide, and some.

BDC agri is the UK broker for Lacto Production milk and whey powder products.

For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com

10 March 2022: The upward vortex continues

The upward vortex continues. At this very moment, Brent Crude has retraced yesterday’s losses that were borne of UAE upping oil production, along with rumours that our new enemy’s friend Iran might become a lesser old enemy if the west lifts the crude oil embargo.

Looking specifically at milk powders, sweet whey posted unchanged levels this week, but skim milk is off the scale again, up €70 and heading inexorably for €4000. The backdrop to that is a wild week in veg oil, with soya oil trading over a huge 5 cent range yesterday, albeit closing down mid range. Hydrolysed wheat gluten is completely unavailable, and lactose and demineralised whey supplies are ample, but at a price. Whey-based CMRs are having to be substituted with soya and other protein concentrates to make spec.

Focusing on the longer term pressures on milk powders, it all seems to come down to crude oil, and the mad western scramble to get around the Russian problem. Despite the prospect of more serious global food poverty, politicians are seriously looking at mandating an increase in biofuel inclusion, and the vegoil of choice is palm, which has now trebled in price in two years. This has ratcheted up soya oil, which will bear the brunt of what almost definitely now will be a huge decrease in sunflower oil from Ukraine. With demand for soya oil for edible use and soya meal for animal feed, in my opinion, the whole soya complex is underpinned for at least the next year. Dairy proteins will likely remain linked to the fortunes of veg proteins, and milk powders will probably be fundamentally revalued at levels above the current evolving market.

BDC agri is the UK broker for Lacto Production milk and whey powder products.

For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com